S&P Ups Brinker International to Accumulate

Brinker International (EAT ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Dennis Milton

The restaurant operator posted June-quarter earnings per share of 56 cents vs. 50 cents, before one-time items, in line with S&P's estimate. Shares are down 11% as the company announced plan to sell Cozymel's chain and take a charge of 15 cents. Shares are trading at 14 times S&P's fiscal 2004 (June) earnings per share estimate of $2.19, which S&P raised by 8 cents to reflect a 53-week year and sales gains at Macaroni Grill. S&P thinks Brinker shares are at an attractive discount to peers. S&P see the sale of Cozymel's as positive, allowing Brinker to focus on growing its more profitable Chili's, Macaroni Grill, and On The Border chains, and views the slump in the stock price as an opportunity to accumulate.

Best Buy (BBY ): Upgrades to 5 STARS (buy) from 4 STARS (accumulate)

Analyst: Amrit Tewary

S&P believes recent weakness in the share price offers an attractive buying opportunity. S&P sees Best Buy as benefiting from productivity steps and growth in its key digital product categories, and views Best Buy as the best-positioned and most strategically focused retailer in S&P's consumer electronics group. S&P is keeping the earnings per share estimates for fiscal 2004 (Feb.) at $2.30 and keeping fiscal 2005's at $2.68. At 17 times S&P's fiscal 2004 estimate, Best Buy shares are at a discount to the S&P 500 and the company's average historical p-e multiple of 23. S&P's 12-month target price of $53 assumes a p-e multiple of 23, based on S&P's fiscal 2004 estimate.

AstraZeneca (AZN ): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Herman Saftlas

AstraZeneca recently raised the 2003 earnings per share guidance to $1.65-$1.75, from $1.50-$1.65, as the impact of such newer drugs as Nexium, Seloken, and Symbicort more than offset the loss of $1.2 billion in first-half sales on patent-expired Prilosec, Zestril, and Nolvadex. New launches of Crestor and Exanta should also aid results, though those products have some side-effect issues. S&P views AstraZeneca shares as adequately valued at a 40% premium to peer European pharmaceutical p-e's. S&P has a 12-month target price of $43, derived by applying AstraZeneca's p-e multiple of 23 to S&P's 2004 earnings per share estimate of $1.85.

Cisco (CSCO ): Maintains 5 STARS (buy)

Analyst: Megan Graham Hackett

Cisco posted July-quarter proforma earnings per share of 15 cents vs. S&P's 14 cents estimate. S&P thinks the results are solid, as revenues of $4.7 billion beat S&P's $4.62 billion estimate and operating cash flow of $1.55 billion also was ahead of S&P's expectations. Gross margin of 69.9% was 140 basis points above S&P's model. Book-to-bill was +1 and orders were up nearly 10% quarter-over-quarter. Cisco sees October-quarter revenue up 2%-4% quarter-over-quarter, and gross margin of 67%-69% -- in line with S&P's model. S&P is keeping the fiscal 2004 (July) earnings per share estimate at 65 cents, but is upping the 12-month target price to $23 from $21, based on S&P's new discounted cash flow analysis, which reflects stronger free-cash flow growth.

CheckFree (CKFR ): Maintains 2 STARS (avoid)

Analyst: Richard Stice

June-quarter earnings per share of 22 cents, vs. 14 cents, both before acquisition related amortization charges, were a penny above S&P's estimate and a penny below the Street's expectations. (The GAAP loss per share was 19 cents vs. 67 cents.) Revenues rose 11%, as all divisions experienced growth. Transactions processed rose 7% from the March quarter. S&P is raising its fiscal 2004 (June) estimate by 3 cents, to 88 cents. But, S&P remains concerned with the trend of banks to shift billing services in-house. The shares trade at a premium to the S&P MidCap 400 on a p-e basis. Combining this metric with S&P's discounted cash flow analysis yields a 12-month target price of $20.

Bradley Pharmaceuticals (BDY ): Maintains 4 STARS (accumulate)

Analyst: Michael Santicchia

Based on significant first-half 2003 sales growth and an increase in new prescriptions, Bradley issued new guidance for 2003 revenues of $64 million to $68 million, up from the previous $50 million to $56 million, and sees 2003 earnings per share of $1.01-$1.06, up from 86 cents to 91 cents. S&P is keeping its recently revised 2003 earnings per share estimate of $1.11 on sales of $64 million, driven by expected strong organic growth of the established Carmol line of products and the newly introduced Rosula Aqueous and AnaMantle HC products. S&P's discounted cash flow model supports a 12-month target price of $23.

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